Yield Is Not Fixed: Why Your Returns Change as Property Value Changes

When landlords talk about yield, they usually quote a single percentage as if it is a permanent characteristic of the property.

A six per cent yield.
A seven per cent yield.
Something in that range.

In reality, yield is not fixed at all. It changes over time, sometimes dramatically, even if the rent stays the same. The reason is simple but often overlooked: yield depends on what value you are measuring against.

Understanding this difference is crucial when deciding whether to hold, refinance, or sell a property.

What yield actually measures

At its core, yield is a ratio. It measures income relative to value.

Most commonly, it is calculated as annual rent divided by the price paid for the property. This makes sense at the point of purchase, when the decision is based on what you invested.

However, once time passes and property values change, this calculation starts to tell a different story.

Purchase price yield vs current value yield

There are two valid ways to think about yield, depending on the question you are asking.

Yield based on purchase price tells you how the property has performed relative to what you originally paid. It answers the question: "How good was this deal when I bought it?"

This is useful for understanding how well a past decision worked and for comparing investments made at different times.

Yield based on current value tells you how the property is performing today relative to what it is worth now. It answers a different question: "If I owned this property outright today, what return am I earning on this capital?"

This distinction is subtle but powerful.

How rising values quietly reduce yield

Consider a simple example.

You bought a property for £200,000. It rents for £1,000 per month, or £12,000 per year. Ignoring costs for simplicity, the yield based on purchase price is six per cent.

Now imagine the property is worth £300,000 today, but the rent has not changed.

The income is still £12,000 per year.
The yield based on current value is now four per cent.

Nothing about the property has worsened. But the return on the capital tied up in it has fallen.

This is not a problem in itself, but it is a reality many landlords fail to acknowledge.

Why this matters for real decisions

Most landlords instinctively focus on purchase price yield because it feels reassuring. It preserves the sense that the original decision was sound.

However, when deciding what to do next, the more relevant question is often about opportunity cost.

Capital locked into a property earning four per cent today could potentially earn more elsewhere, whether through another property, debt reduction, or a different investment altogether.

If you would not buy the property today at its current value for the return it produces, that is a signal worth paying attention to.

The link between yield, equity, and selling decisions

As property values rise, equity increases. This is usually seen as a positive outcome.

However, rising equity without rising income can quietly reduce efficiency. A property might still be cashflow positive and low risk, yet deliver a relatively weak return on the capital tied up in it.

In those cases, landlords are often sitting on a strong balance sheet but a poor-performing asset.

Looking at yield based on current value helps surface this reality without emotion.

Why most calculators miss this

Most property calculators fix yield to purchase price. Once the deal is done, the numbers rarely move.

This makes it difficult to answer questions like:

• What am I really earning on this property today?
• Has capital growth diluted my return?
• Does holding still make sense compared to selling and redeploying the equity?

Without switching the valuation basis, these questions remain unanswered.

Why flexible valuation basis matters

This is why RealYield now allows you to choose how yield is calculated.

You can view yield based on purchase price to understand how the original investment performed.

Or you can switch to current market value to see what return you are earning on today's capital position.

The calculator automatically recalculates yields based on the selected basis, and the results clearly show which valuation is being used. This avoids confusion and makes the context explicit.

This flexibility is not about finding a better-looking number. It is about answering the right question.

A better way to think about yield over time

Yield should evolve as your property evolves.

Early on, purchase price yield is the right lens. Later, current value yield becomes more relevant for strategic decisions.

Neither is right or wrong. They serve different purposes.

Understanding both gives landlords a clearer picture of performance, risk, and opportunity.

Final thought

Yield is not a static badge that a property earns forever. It is a living measure that changes as values, rents, and costs change.

If you want to make better decisions about holding, selling, or refinancing, you need to understand what your property is earning not just on what you paid, but on what it is worth today.

RealYield's flexible valuation basis makes this visible in seconds.